Labor Day (First Monday in September)

I’m Todd Gleason for University of Illinois Extension with a history of Labor Day in the United States. It’s adapted from a story found on the United States Embassy to Sweden’s website.

Eleven-year-old Peter McGuire sold papers on the street in New York City. He shined shoes and cleaned stores and later ran errands. It was 1863 and his father, a poor Irish immigrant, had just enlisted to fight in the Civil War. Peter had to help support his mother and six brothers and sisters.

Many immigrants settled in New York City in the nineteenth century. They found that living conditions were not as wonderful as they had dreamed. Often there were six families crowded into a house made for one family. Thousands of children had to go to work. Working conditions were even worse. Immigrant men, women and children worked in factories for ten to twelve hours a day, stopping only for a short time to eat. They came to work even if they were tired or sick because if they didn’t, they might be fired. Thousands of people were waiting to take their places.

When Peter was 17, he began an apprenticeship in a piano shop. This job was better than his others, for he was learning a trade, but he still worked long hours with low pay. At night he went to meetings and classes in economics and social issues of the day. One of the main issues of concern pertained to labor conditions. Workers were tired of long hours, low pay and uncertain jobs. They spoke of organizing themselves into a union of laborers to improve their working conditions. In the spring of 1872, Peter McGuire and 100,000 workers went on strike and marched through the streets, demanding a decrease in the long working day.

This event convinced Peter that an organized labor movement was important for the future of workers’ rights. He spent the next year speaking to crowds of workers and unemployed people, lobbying the city government for jobs and relief money. It was not an easy road for Peter McGuire. He became known as a “disturber of the public peace.” The city government ignored his demands. Peter himself could not find a job in his trade. He began to travel up and down the east coast to speak to laborers about unionizing. In 1881, he moved to St. Louis, Missouri, and began to organize carpenters there. He organized a convention of carpenters in Chicago, and it was there that a national union of carpenters was founded. He became General Secretary of the United Brotherhood of Carpenters and Joiners of America.

The idea of organizing workers according to their trades spread around the country. Factory workers, dock workers and toolmakers all began to demand and get their rights to an eight-hour workday, a secure job and a future in their trades. Peter McGuire and laborers in other cities planned a holiday for workers on the first Monday in September, halfway between Independence Day and Thanksgiving Day.  On September 5, 1882 the first Labor Day parade was held in New York City.

Lower Pork Costs Driven by Lower Meal Costs

The retail price of a pork chop is getting cheaper. The price of soybean meal is one of the reasons for the decline.

Soybean meal is an important but an “economically” secondary feed ingredient in hog diets compared to corn. Purdue University Agricultural Economist Chris Hurt thinks soybean meal costs, as a feed ingredient, have been about 22 percent of the total costs of raising hogs over the past decade. This compares to 32 percent for corn. In recent years soybean meal has been high priced. For the calendar years of 2012, 2013 and 2014 USDA reports that Decatur, Illinois high-protein meal has had annual averages between $440 and $480 per ton. But with a record U.S. soybean crop in the fall of 2014 and with the second largest crop likely coming this fall, Decatur prices may drop to about $350 per ton and then, as fall turns to winter, even further to average near $325 per ton for calendar year 2016. He says it would be the lowest annual meal price since 2007.

How much have lower soybean meal prices contributed to lower hog production costs? From 2014 highs at $480 per ton to the projected $325 in calendar 2016, costs of production would drop by $5.40 per live hundredweight due to the meal price reduction.

Livestock producers may adjust the corn to meal ratios in diets somewhat depending upon the prices of these two primary feed ingredients. For example, the 2012 drought caused corn prices to be very high relative to soybean meal prices. This relationship caused some shifting to higher protein diets because meal was relatively lower cost than corn. Then for the 2013 and 2014 crops, corn shifted to be cheaper relative to meal. This caused some to reduce their protein levels. In the coming year, corn and meal prices are returning to a more normal long-term relationship.

Estimated total costs of production for a hundredweight of live hogs reached the highest calendar year average in 2012 at $67 per live hundredweight. That dropped to an estimated $51 for 2015. Current projections for 2016 are that total costs will remain about $51. For 2016, lower meal costs are offset by somewhat higher anticipated corn costs, keeping total costs similar to 2015. Clearly a $16 per hundredweight drop in feed costs from 2012 to 2015 and 2016 is a major reduction.

Record costs of production was a contributor, says Purdue University’s Chris Hurt, to higher retail prices. These topped out in September 2014 at $4.22 per pound for USDA’s composite pork average. Of course, PED death losses also contributed to reduced pork production in 2014 as well. Lower priced feed and better control of PED has resulted in higher pork production and as a result consumer pork prices have now fallen to $3.77 per pound.

Given this, Hog producer margins are expected to be near breakeven for both 2015 and 2016. Estimated costs are near $51 and expected live hog prices are near $50. This means a $1 to $2 loss per head. Breakeven implies that supply and demand are close to an equilibrium and that all resources are receiving a “normal” rate of return. This implies that producers have little financial incentive to expand, or to contract. It also means that the lower feed costs over the past few years have been built into more pork production and consumers will now be the beneficiaries of reduced retail prices.

Free & Confidential Tile Line Water Test at Farm Progress Show

Nine states in the Mississippi River basin have developed strategies to control the amount of nitrogen and phosphorous making its way to the Gulf of Mexico. These plant nutrients contribute to the Hypoxia Zone. During the Farm Progress Show the Illinois Corn Growers Association is offering free tile line water sample testing to help make farmers aware of the plan and the problem.

Let’s start with the problem. The fertilizers used on lawns, gardens, and farms doesn’t always stay put. It leaches into streams and rivers and is carried to the Gulf of Mexico where the plant nutrients cause great algae blooms. These deplete the water of oxygen and aquatic life.

The plan is to voluntarily reduce the plant nutrient load. The first step says Illinois Corn Growers Director of Communications Tricia Braid is to make farmers aware of just how much nitrogen is being lost from their fields. That’s why the Corn Growers are offering free water sample testing at the Farm Progress Show.

Quote Summary - Because farmers want to keep the nutrients applied for the crop where the crop needs it. If it is starting to move out of your tiles, that is lost money for the farmer and also a potential problem for the water quality. So we are working at awareness here and helping people get an understanding of what nitrogen movement means on their farms.

This awareness campaign is also related to the recent release of the Illinois Nutrient Reduction Loss strategy. It is a document put forth by the Illinois Environmental Protection Agency and the Illinois Department of Agriculture that sets some clean water goals for all the stake holders in Illinois to achieve.

Quote Summary - So, agriculture plays a big part in that. We are not the only people involved. We understand that, but we certainly do have a role to play. The example we have for the Decatur area, the site of the Farm Progress Show, is that on average tile drained ground in the Sangamon River Watershed loses about 26 pounds of nitrogen per acre per year. That adds up. If it is leaving the tile, it is not helping the crop, and it is going somewhere unintended. We really want folks to understand how nutrients are moving at different times of the year.

Those wanting to have their tile line water tested can bring an 8 ounce sample to the Illinois Corn Growers Association tent at the Farm Progress Show. Collect the sample within 48 hours of arriving. Keep it refrigerated until you leave for the show. If you’d like more results you can do a flow test. Just count off how many seconds it takes the tile line to fill a five gallon bucket.

Corn Prices Reflect Export Concerns

December corn futures have been on roller coaster ride up and down this year. First it appeared there would be way to much of the grain, and then - because of the rains - maybe too little, and now it feels like the too-little might become just enough.

The just enough to meet the need has put pressure on the market to move lower. This weakness, writes Darrel Good in this week’s online Farm Doc Daily article, is coming from the supply side. There is a general agreement USDA’s corn production forecast will not increase. It, in August, put this fall’s corn harvest at 13.686 billion bushels. Instead, market commentary seems to suggest the trade is expecting the yield forecast to decline by as much as three to four bushels to the acre. So the crop is getting smaller, but so’s the price. It’s about demand says Good.

Continuing weakness in corn prices reflects perceived demand weakness. Concerns about demand may stem from two sources. First is the concern that exports of U.S corn will fall short of the current USDA projection of 1.85 billion bushels. Second, is the concern about slow economic growth domestically and globally.

Clearly, domestic consumption of corn during the 2015–16 marketing year is not of immediate concern. The USDA projection of 5.25 billion bushels of corn used for ethanol production is consistent with the 5.2 billion expected for the marketing year just ending and a modest increase in domestic gasoline consumption next year. The projection of 5.3 billion bushels for feed and residual use next year equals the projection for the current year. Another large crop implies large residual use of corn and low corn prices along with steady to higher animal numbers should support actual feed consumption of corn.

On-the-other-hand USDA projects corn exports during the 2015–16 marketing year that begins on September 1 at 1.85 billion bushels, equal to the projection for the current year. However, total outstanding sales of U.S. corn for export during the 2015–16 marketing year are relatively small says Darrel Good.

It is recognized that the magnitude of early sales is not a good predictor of marketing year exports. Since 2005, sales as of mid-August as a percentage of marketing year exports have ranged from about eight percent (2005–06) to 42 percent (2012–13) and averaged 18 percent. Current sales represent 12 percent of the USDA projection for the upcoming marketing year. Still, the small export sales total is concerning in the context of potentially weak world demand, the relatively strong U.S. dollar, and expectations of large supplies of corn in other exporting countries.

Factually, with nearly 55 weeks remaining until the end of the 2015–16 marketing year, export sales need to average about 30 million bushels per week in order for exports to reach 1.85 billion bushels. Here’s how this all plays out on the farm. Producers will need to evaluate the corn storage decision says Darrel Good. Current low prices mean farmers will likely choose to store much of the crop that has not yet been priced. The current basis in the cash market and the carry in the futures market give some indication about the potential return to storing corn. In central Illinois, for example, the average cash bid for harvest delivery reflects a basis of about -$.30 relative to December 2015 contract and -$0.52 relative to July 2016 futures. Good says if the July basis improves to about -$.05 by June 2016 (as it did this year) the market is offering about $0.47 per bushel to store corn for about nine months.

That return would cover the out of pocket costs of farm storage, but may be closer to breakeven for commercial storage costs for some producers. The only way to capture the storage return, however, is to forward price the stored crop in the cash or futures market. The spot price of corn will have to increase by more than $0.47 by next spring in order for the return on corn stored unpriced to exceed the likely return to a storage hedge.